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What is business organisation? an organisation that provides goods and services. Goods and Services: Goods: physical products such as a smartphone. Services: non-physical products such as banking, car washing. CONSUMER GOODS: goods produced for consumers- ordinary people. GOODS Handbag Magazine Crisps Computer game SERVICES Healthcare Banking Air travel Education PRODUCER GOODS: Products sold by one business to another. GOODS Delivery van Office furniture Sugar cane Tools SERVICES Market research Printing Insurance Software design NEEDS AND WANTS Needs: human survival for example: shelter, food, water Wants: human desire for example : luxury car, travelling PURPOSE OF BUSINESS ACTIVITY: PRIVATE ENTERPRISE: Most business are owned privately by individuals or group of individuals. They are private sector business. The objective of a Private enterprise is to make profit. NON- PROFIT MAKING ORGANISATIONS: like charities, they want to raise money for 'good' causes. They need to: raise money try to minimise costs market themselves employ staff Non-profit making organisation aim to meet the needs and wants of the customers. PUBLIC ENTERPRISE: some businesses are owned by central or local government. They are public sector. The main purpose of a public enterprise is to provide goods and services that a private enterprise fail to provide. They don't aim to make profit. They try to provide good quality service. STAKEHOLDER: a individual or group of individuals that has an intrest in the operation of business. EXTERNAL STAKEHOLDER: Owners Employees Managers INTERNAL STAKEHOLDER: Customers Local government Local community Financiers Suppliers KEYWORDS: Entreprenuers: people who take risk and set up a business Scarce resources: the amount of resources available is limited.
CHAPTER 2: BUSINESS OBJECTIVES Employees need something to work towards. Without objectives owners might not have the motivation needed to keep the business going. Objectives help to decide where to take a business and what steps are necessary get there. It is easier to assess the performance a business if objectives are set. PRIVATE SECTOR OBJECTIVES: SURVIVAL PROFIT GROWTH AND WEALTH REACTION INCREASE MARKET SHARE IMAGE AND REPUTATION SMART OBJECTIVES Specific: stating clearly what is trying to be achieved Measurable: capable of numeric measurments Achievable: attainable by the people involved Realistic: able to be achieved given the resources available Time specific: state by which they should be achieved MISSION STATEMENT: describes the purpose of the business help a business to focus provide a plan for the future make clear to all stakeholders what the business is trying to achieve PUBLIC SECTOR OBJECTIVES: increasing special needs provision schools increasing response time by the emergency services reducing specific crime rates reducing waste sent to landfill increasing the number of students entering higher education KEYWORDS: PROFIT MAXIMISATION: making as much profit as possible in a given time period
CHAPTER 3: SOLE TRADER, PARTNERSHIPS AND FRANCHISES Entrprenuers: innovators organisers risk takers decision makers UNINCORPORATED AND INCORPORATED BUSINESS UNINCORPORATED: owners of company have the same legal identity like sole traders and partnerships INCORPORATED: owners (shareholders) and the company have seperated legal identity like LTD and PLC SOLE TRADER: a business owned by a single person adv. all profit is kept by the owner they are independent flexibility can offer a personal service because they are small Disadv. have unlimited liability struggle to raise finance long hours and very hard work no continuity PARTNERSHIPS: a business owned by 2 and 20 people Partners may draw up a deed of partnership it's a legal document which states partners rights. Adv. easy to set up and run partners can specialise in their area of expetise business is shared more capital can be shared with more owners Disadv. Partners have unlimited liability profit has to be shared partners may disagree and fall out partnerships still tend to be small LIMITED PARTNERSHIPS: a partnership where some partnership contribute capital and enjoy a share of the profit but do not take part in the running of the business. FRANCHISES: where a business (the franchisor) allows another operator (the franchisee) to trade under their name. FRANCHISEE: Adv. less risk back - up support is given set - up costs are predictable national marketing may be organised Disadv. profit is shared with the franchisor strict contracts have to be signed lack of independence can be an expensive way to start a business Franchisor ADV. fast method of the growth cheaper method of growth franchisees take some of the risk franchisees more motivated than a employees Disadv. potential profit is shared the franchisee poor franchisees may damage brands reputation franchisees may get merchandise from elsewhere cost of support for franchisees may be high
CHAPTER 4: LIMITED LIABILITY LIMITED COMPANIES: a limited company is a business that is owned by its SHAREHOLDERS who have bought shared from he company, RUN BY DIRECTORS and has a SEPARATE LEGAL IDENTITY from its owner. Main features of limited companies separate legal identity the owners have limited liability capital is raised by selling shares they are run by directors elected by the shareholders companies pay corporation tax to form a limited company its necessary follow a legal procedure STEPS TO FORM A LIMITED COMPANY: register with REGISTRAR OF COMPANIES at companies house Draw up a MEMORANDUM F ASSOCIATION Draw up the ARTICLES OF ASSOCIATION Obtain a certificate of incorporation from the companies' registrar the company can then start trading PRIVATE LIMITED COMPANIES- LTD denoted by limited, ltd or pty ltd shares transferred privately all shareholders must agree on the transfer , cannot be advertised for sale shared cannot be traded on stock market owned by family members and friends directors tend to be shareholders PUBLIC LIMITED COMPANIES- PLC VERY LARGE BUSINESSES PRIVATE SECTOR DENOTED BY PLC, plc MINIMUM IF $50,000 SHARE CAPITAL POSSIBILITY OF SOME SHARES REMAINING UNSOLD ADVERTISING AND ADMINISTRATIVE EXPENSES SHARES BOUGHT AND SOLD BY THE PUBLIC ON THE STOCK EXCHANGE ADV. LTD - limited liability sales of shares separate legal identity original owner retains control ore ability to raise capital continuity has more status PLC- limited liability incorporated business separate legal identity c continuity raise large amount of capital very high profile in the media easy to attract suppliers DISADV. LTD financial info. has to be made public cost money ant time to set up profits are shared takes time to transfer shares to new owner cannot raise huge amounts of money like plcs PLC setting up costs can be very expensive outsiders can take control buying shares more financial information has to be made public may be more remote from customers more regulatory control due to company acts managers may take control rather than owners DIFFERENCES BETWEEN AN LTD AND A PLC PUBLIC LIMITED COMPANY (PLC) the shares are offered to the general public on the stock exchange, meaning anyone an be a shareholder in the company if something goes wrong it could have an adverse effect on the public shares can be transferred freely PRIVATE LIMITED COMPANY (LTD) the shares are not offered for sale to the general public,usually just family or friends probably wouldn't have an adverse effect usually sold o family or friends and can only be done if all shareholders agree. JOINT VENTURES two or more business work closely together one project ADV. shared risks reduced costs shared research and development costs most are friendly. may help to improve the success of the venture competition may be eliminated DISADV. policy and management disagreements conflicts disputes profit is split between the investors reduces profit potential
CHAPTER 5: MULTINATIONAL COMPANIES GLOBALISATION its the growing integration of the worlds economies WHY HAVE MULTINATIONALS BEEN CREATED? economies of scale mrketing technical and financial superiority ADV. MULTINATONALS increase in income and employment increase in tax and revenue increase in exports transfer of technology improvements in the quality of human capital enterprise development DISADV. environmental damage exploitation of less developed countries repatriation of profits lack of accountability
CHAPTER 6: FACTORS INFLUENCING THE CHOICE OF ORGANISATION FACTORS AFFECTING THE CHOICE OF BUSINESS ORGANISATION growth the need for finance control limited liability OTHER FACTORS the type of business activity may influence the choice f legal status the way in which a business plans to use its profits may be important the different stakeholders such as employees ad shareholders might influence the choice of organisation
CHAPTER : FACTORS O PRODUCTION PRODUCTION: the transformation of resources into goods and services FOUR FACTORS OF PRODUCTION land : business will need a plot of land locate their premises capital : often said to be an artificial resource because it is made by labour working capital: refers to stocks of raw materials and components that will be used up in production. fixed capital: factories, shops, machines, tools equipment and furniture used in production. TO CONVERT WORKING CAPITAL INTO GOODS AND SERVICES. labour: the workforce in the economy or the people used in the production enterprise: responsible for setting up and running businesses THEY COME UP WITH THE BUSINESS IDEA RISK TAKERS OWNERS RESPONSIBLE FOR ORGANISING RSOURCES LABOUR - INTENSIVE PRODUCTION its production methods that make ore use of labour relative to machinery they use labour more than capital labour is used more in far eastern countries like China as its cheap CAPITAL- - INTENSIVE PRODUCTION they are production methods that make more use of machinery relative to labour relies more on the use of plant and machinery production in the west ends to be more capital intensive SPECIALISATION AND THE DIVISION OF LABOUR Specialisation:in business, the production of a limited range of goods Division of labour: specialisation in specific tasks or skills by an individual THE DIVISION OF LABOUR WILL INCREASE PRODUCTIVITY BECAUSE: Workers concentrate on the task that they do best Workers' skills improve as they continually repeat the same task time is saved the oragnisation of production is easier
CHAPTER 8: PRIMARY, SECONDARY AND TERTIARY ACTIVITY PRIMARY SECTOR involves extracting raw materials from the earth like: mining and quarrying fishing forestry agriculture SECONDARY SECTOR involves converting raw materials into finished or semi-finished goods TERTIARY SECTOR involves the production of services in the economy Such as: Professional services: accountancy, legal advice and medical care Transport: train, taxi, bus and air services Leisure services: television, tourism, hotels and libraries Financial services: banking insurance Commercial services: freight delivery, debt collection, printing. DE-INDUSTRIALISATION: the decline in manufacturing
CHAPTER 9: BUSINESS LOCATION FACTORS AFFECTING BUSINESS LOCATION: the cost of premises or land transport cost and availability of labour proximity to the market government constraints and opportunities INTERNATIONAL LOCATION avoiding trade barriers financial incentives cost of labour proximity to markets or suppliers political stability language barriers CHANGING ENVIRONMENT More home-based businesses The internet Legislation Changes in factor costs New markets
CHAPTER 10: GOVERNMENT INFLUENCE ON BUSINESS HOW DOES THE GOVERNMENT INFLUENCE BUSINESS ACTIVITY? consumer legislation health and safety employment legislation environmental legislation competition policy protectionism economic and regional policy THE ROLE OF THE GOVERNMENT IN TH ECONOMY Promote economic growth:n increase in national income in the economy Maintain price stability: the government will want to keep inflation low Reduce unemployment: unemployment occurs when people cannot find a job,Unemployment is bad for the economy because it is a waste of resources. Control the balance of payments: some governments get concerned if imports are much higher than exports. This means that a country is relying too heavily on foreign good and services. Reduce the gap between the rich and the poor: it is not desirable if some groups in society are very poor while the others live in luxury as they may result to social problems such as crimes. WHY DO GOVERNMENTS INFLUENCE BUSINESSES?
BOOM: national income is growing fast demand will be rising jobs will be created wages will be rising and the profits made by firms ill be rising but, prices might also be rising 2. RECESSION: if the national income is flat or starts to fall, the bottom of the cycle may be referred to as recession. demand will start to fall for many goods and services unemployment rises sharply business confidence is low bankruptcies rise prices become flat r even fall 3. Control the impact of business: Governments y influence business to protect people and the environment . 4. Employees: may need protection ensure that their working environment is safe and not exploited. 5. CONSUMERS: may need protection from businesses they may develop an monopoly. this means they will have very little competition 6. ENVIRONMENT DAMAGE: some business activity may damage the environment like a business might lower its costs by dumping waste into the river as this may kill plants and animal life. governments use legislation to protect the environment fro businesses. FISCAL POLICY involves changing the levels of taxation and government spending to adjust the level of demand in the economy. governments can use changes in taxes and government spending to help achieve their aims. MONETARY POLICY involves the government adjusting the money supply to control demand in the economy. lower interest rates will increase demand in the economy because it will be cheaper REGIONAL POLICY designed to solve regional problems such as unemployment a lot of regional policies m at attracting new businesses into these run-down areas. regional policy will influence location decisions made by business KEYWORDS: MONOPOLY: where one business dominates the whole market ECONOMIC GROWTH: an increase in income, output and expenditure to manage the economy
CHAPTER 11: GOVERNMENT INFLUENCE ON BUSINESS -LEGISLATION AND OTHER CONTROLS CONSUMER PROTECTION: without government regulation some firms would exploit consumers by using anti-competitive practices SUCH AS: increasing prices restricting consumer choice raising barriers to entry market sharing HOW DOES LEGISLATION PROTECT THE CONSUMER TRADING AND AGE RESTRICTIONS THE INFORMATION GIVEN ABOUT PRODUCTS PRICES CUSTOMER PAYMENT METHODS CONSUMER RIGHTS THEY WAY PRODUCTS ARE PREMOTED THE QUALITY OF PRODUCTS THE AFETY OF PRODUCTS CONSUMER POLICY one of the roles of the government in the economy is to promote competition this helps to prevent anti-competitive practices and consumer exploitation. they do this by: encouraging the growth of small firms: with more small firms the market is less likely to be dominated by one very large firm. lower barriers to entry: f barriers to entry are lowered or removed then more firms will join a market. This will make it more competitive. introduce anti-competitive legislation: laws designed to protect consumers from exploitation by monopolies, mergers and restrictive practices. HEALTH AND SAFETY LEGISLATION in some jobs the working environment can be dangerous. because of the danger to employees , governments aim to protect workers by passing legislation which forces businesses to provide a safe and healthy workplace. EMPLOYMENT LEGISLATION Governments often pass legislation to protect peoples' rights at work. they might pay low wages, make them work long hours, discriminate against certain groups and dismiss them unfairly. ENVIRONMENTAL LEGISLATION AND OTHER CONTROLS Pollution: water, visual, noise and air Destruction of wildlife and habitat: when businesses develop on greenfield sites plant and animal life is often destroyed. Traffic congestion: extra traffic caused by commercial vehicles or workers travelling to and from work can cause congestion resulting in delays and accidents Wasted resources: some of the packaging that is used by the businesses is unnecessary and they dont make enough use of recycles materials. Environmental legislation used by governments to minimise the damage done by businesses to the environment is to pass new laws. if business fail to comply the environmental laws they may be fined or forced to close until they're problem is resolved. TAXES AND SUBSIDIES taxation an also be used to help reduce pollution this should reduce demand for the firms product and therefore reduce pollution. Governments can offer grants, tax allowance and other subsidies to firms as an incentive to reduce pollution and encourage greener practices. this might encourage households and firms to recycle their plastic waste instead of dumping it.
CHAPTER 12: INTERNATIONAL TRADE AND EXCHANGE RATES INTERNATIONAL TRADE creates opportunities or business growth increase competition provides more consumer choice why international trade? to obtain goods that cannot be produced domestically to obtain goods that can be bought more cheaply from overseas to improve consumer choice to sell off surplus commodities VISIBLE TRADE trade in physical goods the difference between total visible exports and imports are called the visible balance or balance of trade. INVISIBLE TRADE involves trade in services BENEFITS FROM INTERNATIONAL TRADE free trade where a country allows foreign businesses access to its markets and the governments do not restrict imports. Consumer choice: buy products that are impossible to produce Competition: competition increase because most countries import goods that they can also produce themselves. Growth: by selling overseas businesses generate more sales and more profit. Helps multinationals to develop. Less risk: risk may be reduced when trading conditions become poor. PROTECTIONISM an approach used by a government to protect domestic producers governments can use a number of measures t restrict trade is called trade barriers. METHODS OF PROTECTIONOSM Tariffs: a tax on import to make them more expensive Quotas: a physical limit on the quantity of imports allowed into a country. Subsidies: subsidy- financial support given to a domestic producer to help compete with overseas firms. Administrative barriers: restricts imports by insisting that imported goods meet strict regulations and specifications. Depreciating exchange rates: reduce imports and increase exports by allowing the exchange e to fall this is called devaluation. lower exchange rates means that exports are cheaper and imports are dearer. EXCHANGE RATES the price of one currency in terms of another. IMPACTS OF DEPRECIATION IN THE EXCHANGE RATE ON IMPORTS AND EXPORTS Changes in the exchange rate can have an impact on the demand for exports ad imports this is because when the exchange rates changes the prices of exports and imports also change. IMPACT ON EXPORTS: when the exchange rate falls the dollar price of the goods also falls IMPACTS ON IMPORTS: when the exchange rates falls the sterling price to the importer rises IMPACTS OF AN APPRECIATION a rise in the exchange rate will have the opposite effect n the demand for exports and imports IMPACT ON EXPORTS: when the exchange rises the dollar price the goods also rises. IMPACT ON IMPORTS: when the exchange rate rises the sterling price to the importer falls.
CHAPTER 13: EXTERNAL INFLUENCES THE SOCIAL ENVIRONMENT changes in society MORE CONSUMER AWARENESS CHANGING DEMAND PATTERNS INCREASED OF NUMBER WOMEN AT WORK MORE PART-TIME WORKERS URBANISATION BUSINESS ETHICS business ethics is about morality- 'doing the right thing' THE ENVIRONMENT SUSTAINABILITY global warming habitat destruction resource depletion sustainable development: people should satisfy their needs and enjoy better living standards without reducing the quality of life of future generations. TECHNOLOGY New technology results in new products which in turn provide new market opportunities New technology means production becomes re capital-intensive and costs are reduced
CHAPTER 14: JUDGING SUCCESS MEASURES OF SUCCESS PROFIT: It is possible to make higher profits if there is no competition in the market. the amount of profit made by a business will often depend on its size profit should also be compared with that made by other businesses in the same industry. profit can only be used t measure success if the objective of the business is to maximise profit. SIZE: Turnover The number of employees Market share The amount of capital employed EU definitions of size PRODUCT QUALITY: some businesses are extremely focused on their products they strive for very high quality and technical excellence awards and prizes won by business media reports customer surveys SOCIAL RESPONSIBILITY: try to meet the needs of a wider range of stakeholders, such as employees. carry out a social audit to judge the social impact and ethical behaviour of the business. CONSUMER SATISFACTION how consumers needs and wants have been satisfied when judging sucess businesses are becoming more customer-focused and make efforts to get feedback from their customers. SUCCESS IN THE PUBLIC SECTOR: when judging the success of public sector organisations it is important to recognise the objectives are likely to be different from those in the private sector. examination results in schools the response time of the emergency services crime rates the amount of waste sent to recycling units BUSINESS FAILURE The people running the business may not have the necessary skills. Businesses often fail because they run out of cash A sharp fall in sales
CHAPTER 15: Internal Organization Formal Organisation: the internal structure of a business as shown by a organistaion chart. small forces do not need a formal organistaion cause the workforce is small and everyone will know what the others are doing. The formal organistation can be represented
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